The Securities and Exchange Commission today ordered to pay $3.6 million in fines to settle accusations that it failed to prevent a former wealth manager from stealing clients’ funds.
As part of the settlement, the bank was ordered to cooperate with auditors’ inquiries and to establish better procedures for complying with federal laws that protect investors’ holdings. Morgan Stanley Smith Barney (MSSB) neither admitted nor denied wrongdoing.
The SEC said Barry Connell, who worked in MSSB office in New Jersey from 2008 to 2016, stole money from accounts belonging to four advisory clients’ accounts. He was charged with and aggravated identity theft by the office of U.S. Attorney in Manhattan.
Due to the inadequate controls, Connell conducted 110 unauthorized transactions from December 2015 to November 2016, which allowed him to misappropriate approximately $7 million out of accounts of a married couple and their daughter.
According to , Connell purportedly used the stolen money to fund his “lavish lifestyle,” which included renting a home in suburban Las Vegas and pay for a country club membership and private jet service.
Morgan Stanley fired Connell in November 2016, citing his unauthorized withdrawals from client accounts for his own benefit. In some instances, he told his employer that he had client permission to make wire transfers and, in other cases, misused client’s checks that were intended only to pay their bills.
The SEC statement further states: “The order finds that MSSB failed to have reasonably designed policies and procedures in place to prevent its advisory representatives from misusing or misappropriating funds from client accounts. The order further finds that although MSSB’s policies provided for certain reviews of disbursement requests, the reviews were not reasonably designed to detect or prevent such potential misconduct.”
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